CFOs See Good Signs in Economy

A pair of surveys on CFO sentiment pointed to positive expectations for the economy.

According to the latest edition of Grant Thornton LLP's biannual CFO survey, the nation's financial leaders remain confident in the U.S. economy even in the midst of global uncertainty. Nearly half (47 percent) of CFOs expect the U.S. economy to improve during the next six months, while only 9 percent expect it to worsen.

In addition, 91 percent of CFOs expect their company’s hiring to increase or remain the same in the next six months This stable optimism is fueling growth, with 87 percent of companies planning to pursue organic growth in the coming year and more than a third of companies considering a merger or acquisition

Grant Thornton’s survey findings indicate that economic optimism has remained stable during the past year despite increasing global uncertainty. In spring 2014, 51 percent of the respondents polled said they expect the economy to improve during the next six months, compared to 40 percent in the fall of 2013 and 45 percent in the firm’s spring 2013 survey.

In this environment, the most common growth strategies for businesses in the upcoming year include pursuing organic growth in existing markets (87 percent) and introducing new products or services (72 percent). In addition, more than one-third (37 percent) of the CFOs polled said their companies are considering a merger or acquisition in the next 12 months. For companies with more than $5 billion in annual revenue, that number is even higher at 60 percent.

“While it’s encouraging that CFOs aren’t expecting contraction, they’re not predicting significant growth either,” said Grant Thornton CEO Stephen Chipman in a statement. “It’s vital that our country’s political leaders focus now on resolving this uncertainty by advancing comprehensive tax and entitlement reforms to spur economic growth.”

Bank of America Merrill Lynch Survey
Another survey, by Bank of America’s Merrill Lynch unit, was even more positive than Grant Thornton’s, finding that CFOs believe the U.S. economy is at its highest level since the 2008 recession and anticipate growth in their sales, workforce and companies in 2015.

The Bank of America Merrill Lynch 2015 CFO Outlook surveyed 603 financial executives with annual revenues ranging from $25 million to $2 billion, and found a majority of CFOs report the outlook for their companies as increasingly positive.

On a 100-point index, with zero being extremely weak and 100 being extremely strong, the CFOs surveyed gave the U.S. economy an average score of 59, an increase from the 53 reported in the 2014 CFO Outlook and the highest level since the recession in 2008.

CFOs reported that they are more optimistic that the economy will expand in 2015 than they have been in the past four years. Fifty-two percent of the CFOs polled predicted expansion next year (vs. 47 percent for 2014) and another 37 percent expect the economy to remain stable.
When CFOs were asked to evaluate certain factors in terms of their potential impact on the U.S. economy in 2015, health care costs were the most heavily cited (56 percent), but that is down considerably from 2014 (67 percent).

In addition, 45 percent of CFOs expressed concerns about the effects of global conflict on the U.S. economy. Companies with no foreign market involvement were more likely to be concerned with this issue (50 percent), while companies with foreign operations were less concerned (40 percent).

For the first time in seven years, more than half (52 percent) of the CFOs surveyed by Merrill reported they expect to hire additional full-time employees in 2015, while 44 percent have no plans to change the size of their workforce.

CFOs reported their companies are investing in retaining and attracting qualified employees by providing benefits, including 96 percent offering health care insurance, 92 percent funding retirement programs, and 87 percent offering bonuses or other compensation. More than half also offer wellness programs (63 percent), education funding (54 percent) and flexible work hours (52 percent).

Sales growth is expected by 63 percent of CFOs in 2015, up significantly from 54 percent for 2014. Sixty-three percent of the companies surveyed expect to grow exclusively in the U.S., while the remaining 37 percent anticipate both domestic and international growth.

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